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Federal Budget Commentary
n February 27, 2018 the Honourable Bill Morneau, Minister of Finance, presented the 2018 Federal Budget, Equality + Growth: A Strong Middle Class, to the House of Commons.
The Government's fiscal position includes a projected deficit in 2017-2018 of $19.4 billion, and projected deficits in the coming years as follows: 2018-2019 of $18.1 billion, 2019-2020 of $17.5 billion, 2020-2021 of $16.9 billion, 2021-2022 of $13.8 billion and 2022-2023 of $12.3 billion.
The Federal Government notes:
- No change to the personal and corporate tax rates, nor inclusion rate on taxable capital gains.
- $1.7 billion over five years to support research in big data.
- $40 billion over ten years to create 100,000 new housing units and repair 300,000 units as part of the National Housing Strategy.
- $1.4 billion in financing over three years for women entrepreneurs through the Business Development Bank of Canada.
- $116 million over five years to the RCMP to support the National Cybercrime Coordination Unit.
- $360 million over three years towards an Indigenous Early Learning and Child Care Framework for First Nations, Inuit and Metis Nation children.
- $100 million over five years directed to Status of Women Canada to enhance the Women's Program (training, skills development, community engagement).
- $100 million for early learning and child care innovation, plus $95 million to better understand what child care looks like in Canada, over eleven years.
- $75 million to support the Healthy Seniors Pilot Project in New Brunswick.
- $90.6 million to CRA over five years to address additional cases of potential tax evasion/avoidance identified through enhanced risk assessment systems.
- $41.9 million to the Courts Administration Service over five years, plus $9.3 million per year ongoing, including support for new front-line registry and judicial staff, most expected to support the Tax Court of Canada.
Personal Income Tax
Canada Workers Benefit
Budget 2018 proposes to rename the Working Income Tax Benefit to the Canada Workers Benefit. The amount
of the benefit will be equal to 26 percent of each dollar of earned income in excess of $3,000 to a maximum benefit of $1,355 for single individuals without dependants and $2,335 for families (couples and single parents). These amounts are increased from the prior maximum amounts of $1,192 and $2,165, respectively.
The Benefit will be reduced by 12 percent of adjusted net income in excess of $12,820 for single individuals without dependants and $17,025 for families. Previously, the reduction rate was 14 percent. Each province may arrange variances from these amounts.
Ability to access the Benefit for those that have filed returns, but not claimed the Benefit, will also be improved.
This measure will apply to the 2019 and subsequent taxation years. Indexation of amounts relating to the Canada Workers Benefit will continue to apply after the 2019 taxation year.
Medical Expense Tax Credit - Eligible Expenditures
Budget 2018 proposes to expand the medical expense tax
credit to recognize such expenses where they are incurred in
respect of an animal specially trained to perform tasks for a
patient with a severe mental impairment in order to assist
them in coping with their impairment (e.g., a psychiatric service
dog trained to assist with post-traumatic stress disorder).
For example, these tasks may include guiding a disoriented patient, searching the home of a patient with severe anxiety before they enter and applying compression to a patient experiencing night terrors. Expenses will not be eligible if they are in respect of an animal that provides comfort or emotional support but that has not been specially trained to perform tasks as described above.
This measure will apply in respect of eligible expenses incurred after 2017.
Registered Disability Savings Plan (RDSP) - Qualifying Plan Holders
Where the adult individual does not have a legal representative
in place, a temporary federal measure exists to allow a
qualifying family member (i.e., a parent, spouse or commonlaw
partner) to be the plan holder of the individual's RDSP.
Previously legislated to expire at the end of 2018, Budget 2018 proposes to extend the temporary measure by five years, to the end of 2023. A qualifying family member who becomes a plan holder before the end of 2023 could remain the plan holder after 2023.
Mineral Exploration Tax Credit for Flow-Through Investors
The Government proposes to extend eligibility for the mineral
exploration tax credit for an additional year, to flowthrough
share agreements entered into on or before March
31, 2019. Under the existing "look-back" rule, funds raised in
one calendar year with the benefit of the credit can be spent
on eligible exploration up to the end of the following calendar
year. Therefore, for example, funds raised with the credit during the first three months of 2019 can support eligible exploration until the end of 2020.
Employee Contributions to the Quebec Pension Plan
To provide consistent income tax treatment of CPP and QPP
contributions, Budget 2018 proposes to amend the Income
Tax Act to provide a deduction for employee contributions
(as well as the "employee" share of contributions made by
self-employed persons) to the enhanced portion of the QPP.
In this regard, the Government of Quebec announced on
November 21, 2017 that the enhanced portion of employee
CPP and QPP contributions will be deductible for Quebec
income tax purposes.
Since contributions to the enhanced portion of the QPP will begin to be phased in starting in 2019, this measure will apply to the 2019 and subsequent taxation years.
Child Benefits - Foreign Born Status Indians
Under the Canada Child Benefit, as announced in Budget
2016, foreign-born status Indians residing legally in Canada
who are neither Canadian citizens nor permanent residents
are eligible for the Benefit, where all other eligibility requirements
are met. However, these individuals were not eligible
under the previous system of child benefits.
Budget 2018 proposes that such individuals be made retroactively
eligible for the Canada Child Tax Benefit, the National
Child Benefit supplement and the Universal Child Care
Benefit, where all other eligibility requirements are met.
This amendment applies from the 2005 taxation year to June
Business Income Tax
The budget confirmed income tax measures released on December 13, 2017 to address income sprinkling. Below is a summary of the proposals as they are currently drafted.
Individuals that receive certain types of income derived from a "related business" will be subject to Tax on Split Income (TOSI) unless an exclusion applies. TOSI is subject to the highest personal tax rate with no benefit of personal credits.
Commencing on January 1, 2018 TOSI will potentially apply in respect of amounts that are received by adults, not just those under 18 years. The application of TOSI to individuals under age 18 (commonly known as the "kiddie tax") would not generally change.
Income Streams at Risk
Private corporation dividends, partnership allocations, trust allocations, capital gains, and income from debt may all be subject to TOSI.
A related business includes any business, where another individual related to the recipient of income does any of the following:
- personally carries on the business (this means income from a sole proprietorship to a related person can be subject to TOSI);
- is actively engaged in the business carried on by a partnership, corporation or trust;
- owns shares of the corporation carrying on the business;
- owns property the value of which is derived from shares of the corporation having a fair market value not less than 10% of the fair market value of all of the shares of the corporation; or
- is a member of a partnership which carries on the business.
The definition is broadly drafted to capture income derived directly or indirectly from the business.
Exceptions and Exclusions
Several exclusions from the TOSI rules for adult individuals have been introduced.
Some exclusions depend on the age of the taxpayer at the start of the taxation year. Different rules apply to taxpayers at least 17 years of age at the start of the year (i.e. these exceptions are first available in the year the taxpayer turns 18) and to those at least 24 years of age at the start of the year (i.e. these exceptions are first available in the year the taxpayer turns 25). For the purposes of this analysis, the first age group will be referred to as those "over age 17" while the second group will be referred to as those "over age 24".
The exclusions are as follows:
- Excluded Business: A taxpayer over age 17 will not be subject to TOSI on amounts received from an excluded business. An excluded business is one where the taxpayer is actively engaged on a regular, continuous and substantial basis in either the year in which the income is received, or in any five previous years. The five taxation years need not be consecutive.
An individual will be deemed to be actively engaged in any year where the individual works in the business at least an average of 20 hours/week during the portion of the taxation year that the business operates. A person not meeting this bright line test may also be "actively engaged" depending on the facts, but this will carry greater risk of challenge by CRA.
- Excluded Shares: A taxpayer over age 24 will be exempt from TOSI in respect of income received from excluded shares, including capital gains realized on such shares.Many restrictions apply to qualify for this exclusion, which makes it quite complex and uncertain. The taxpayer must directly own shares accounting for at least 10% of the votes and value of the corporation's total share capital. For 2018, this test can be met by December 31. In later years, it must be met when the income is received. Also, the corporation can not be a professional corporation (i.e. a corporation carrying on the business of an accountant, chiropractor, lawyer, dentist, medical doctor or veterinarian). Further, it must earn less than 90% of its business income from provision of services. Finally, substantially all of its income (generally interpreted as 90% or more) must be derived from sources other than related businesses, which will be problematic for holding companies.
- Reasonable Return: TOSI will not apply to amounts which reflect a reasonable return
Certain Capital Gains: Although TOSI will be expanded to apply to capital gains of interests in entities through which a related business is carried on, some gains will be excluded. For example, capital gains arising due to a deemed disposition on death. Also, capital gains on qualified farm or fishing property, or qualified small business corporation shares will generally be excluded from TOSI.
- For taxpayers over age 24, an amount which is reasonable is based on work performed, property contributed, risks assumed, amounts paid or payable from the business, and any other factors in respect of the business which may be applicable.
- For taxpayers over age 17, but not over age 24, the rules are more restrictive. Only a reasonable return in respect of contributions of capital will be considered.
Retirement Income Splitting: The TOSI rules will not apply to income received by an individual from a related business if the recipient's spouse was age 65 in or before the year in which the amounts are received and the amount would have been excluded from TOSI had it been received by the recipient's spouse.
Additional exclusions apply for some income from inherited property and property acquired as a result of a relationship breakdown.
Since Budget 2017 first expressed an intention to reduce the tax benefits of accumulating passive assets in a Canadian controlled Private Corporation (CCPC), private business owners and their advisors have been faced with a series of proposals and comments on the taxation of passive income.
Budget 2018 includes details of a new passive investment tax regime for CCPCs, proposed to apply to taxation years commencing after 2018. Two significant changes are proposed, first a limit in access to the small business deduction for CCPCs generating significant income from passive assets, and second, a new regime to stream the recovery of
refundable tax to the payment of specific types of dividends
(eligible versus non-eligible).
Access to the Small Business Deduction (SBD)
The first prong of the passive income proposals will reduce access to the SBD for CCPCs having more than $50,000 of passive income. This is consistent with the Government's October, 2017 announcement that the first $50,000 of passive income would be exempt from any new rules.
CCPCs with passive income in excess of $50,000 will lose $5 of business limit for every $1 of additional passive income, such that the entire business limit will be eliminated for CCPCs having $150,000 or more passive income in the year.
Some CCPCs already have a reduced business limit due to high taxable capital. The greater of that reduction and the new reduction for passive income will apply.
Consistent with the existing SBD rules, passive income of all associated corporations will apply to determine the reduced business limit available to the associated group. The prior year's passive income will determine the current year's SBD limit.
What is "Passive Income"?
Certain types of income considered "passive" are subject to different corporate tax rules. Common forms of income subject to existing "passive income" rules include interest, rental income, royalties, dividends from portfolio investments and taxable capital gains.
Various exceptions presently apply, and will also apply to these new rules. For example, income incidental to an active business is excluded. As well, income which would otherwise be considered passive which is received from an associated corporation generally retains its character as active income. A common example of this exception is rent paid from a corporation carrying on an active business to an associated corporation which owns the business real estate.
For purposes of these new rules, capital gains on certain types of property will also be excluded. These are as follows:
- Capital gains realized on the disposition of property used principally in an active business carried on in Canada. The active business could be carried on by the owner of the asset, or by a related party. Examples of gains which will not count towards passive income under this exception include gains on sale of the goodwill of an active business, and gains on the real estate from which the active business operates.
- Capital gains realized on shares of another CCPC all or substantially all of whose assets are used in
an active business carried on in Canada will generally be excluded, provided the seller has a significant interest (generally over 10%) in that corporation.
- Similarly, capital gains realized on an interest in a partnership all or substantially all of whose assets
are used in an active business carried on in Canada will generally be excluded where the seller has a significant interest (generally over 10%) in the partnership.
Where capital losses realized in a different taxation year are applied to offset capital gains realized in the current year, these losses will not reduce passive income for these new rules.
Recovering Refundable Taxes
Passive income is subject to a high corporate tax rate. However, a portion of these taxes are refunded when the
CCPC pays taxable dividends. The Government had previously suggested eliminating the refundability of this tax. That suggestion has been abandoned.
However, the second prong of the passive income proposals will add a new restriction. Recovering refundable taxes will generally require the payment of non-eligible dividends. These carry a higher personal tax cost than eligible dividends.
The exception will be refundable taxes arising from eligible dividends received. Most public corporations pay eligible dividends. This refundable tax will continue to be recoverable by paying any type of dividends, including
The proposals also include anti-avoidance measures.
While these new rules will generally apply only to taxation years commencing after 2018, they will apply earlier where planning transactions are undertaken to delay their application.
As well, transfers of passive assets between related corporations may result in the transferor and transferee corporations being required to combine their passive income for the purposes of the reduction to their SBD limits. This provision could apply, for example, if a corporation transfers investment assets to a second corporation owned by the spouse or children of the owner of the first corporation.
Clean Energy Generation Equipment
A variety of assets related to clean energy generation and
energy conservation qualify for accelerated capital cost
allowance at rates of either 30% (Class 43.1) or 50% (Class
43.2). Access to the 50% rate is currently available only for
assets acquired before 2020. Budget 2018 proposes to
extend this to assets acquired before 2025 (so on or before
December 31, 2024).
Budget 2018 proposes enhancements to several antiavoidance
rules related to complex structures and
transactions. A brief summary of the types of transactions
affected is provided below.
Equity-Based Financial Arrangements
A variety of complex anti-avoidance provisions apply to deny the normal tax-free status of intercorporate dividends in circumstances perceived as abusive by the Department of Finance. Budget 2018 enhances existing anti-avoidance rules related to the following:
- Synthetic equity arrangements, where a taxindifferent investor obtains the risk of loss and opportunity for gain or profit in respect of Canadian shares without an actual transfer of the shares resulting in a taxable disposition to the original owner.
- Securities lending arrangements, where a Canadian share is transferred or loaned to a taxpayer, and the taxpayer agrees to transfer or return an identical share in the future. Over the term of the arrangement,
the taxpayer is obligated to pay "dividend compensation payments" for all dividends received on the transferred or lent Canadian share, which they deduct against other sources of income.
Tiered Limited Partnerships
A recent court decision suggested it may be possible for the ultimate partners to avoid the "at-risk" rules by using such structures. Budget 2018 proposes to extend the at-risk rules to partnerships which are limited partners in other partnerships ("tiered limited partnerships").
Health and Welfare Trusts - Consultation
Health and Welfare Trusts (HWTs) are not presently governed
by income tax legislation. However, CRA has an extensive
series of administration policies under which these
Trusts are treated differently from a typical trust. In contrast,
Employee Life and Health Trusts (ELHTs) are the subject of
specific tax legislation. Both types of Trust provide similar
benefits to employees of one or more organizations which
fund the Trust.
While the ELHT rules are similar to CRA's administrative positions on HWTs, they are not identical. Budget 2018 proposes that CRA will cease to apply their HWT administrative positions after 2020. Existing HWTs will either transition to ELHTs under transitional rules, or will become subject to the normal income tax rules for trusts after 2020.
HWTs established after Budget Day will be ineligible for CRA's administrative positions from their creation, so they must either be structured as ELHTs or be subject to the normal rules for Trusts.
Stakeholders are invited to submit comments on transitional issues, both administrative and legislative, after which the Government intends to release draft legislative proposals and transitional administrative guidance.
Cross-Border Surplus Stripping Using Partnerships and Trusts
The current cross-border surplus stripping rules are designed to prevent a non-resident shareholder from extracting amounts from a Canadian corporation in excess of the paidup capital (this is generally the amount invested in the corporation) without being taxed on a dividend. In order to capture transactions using partnerships and trusts that are designed to achieve the same outcome, Budget 2018 proposes to implement a series of "look-through" rules for transactions that occur on or after Budget Day. These look-through rules
will allocate the assets, liabilities and transactions of a partnership or trust to its members or beneficiaries, as the case may be, based on the relative fair market value of their interests.
Income Tax Act contains special rules for the taxation of
Canadian resident shareholders of controlled foreign affiliates.
Shareholders are generally taxed on their share of corporately
retained passive earnings. In some situations,
taxpayers may pool their investment assets in one corporation
in order to avoid this tax. Commonly, they would track
their specific assets held within the corporation separately (a
Often these arrangements are set up to avoid meeting the
definition of controlled foreign affiliate. Budget 2018 proposes
to deem such a corporation to be a controlled foreign
affiliate of the taxpayer where such a tracking arrangement
Another reason that such a corporation may be set up is to
meet the exception for businesses with more than five fulltime
Budget 2018 proposes to deem such a corporation to have
separate businesses where tracking arrangements exist. As
such, more than five employees would be required for each
business in order to meet the exception.
These measures will apply to taxation years of a taxpayer's
foreign affiliate that begin on or after Budget Day.
Filing Due Dates
Budget 2018 proposes to bring the information return deadline
in respect of a taxpayer's foreign affiliates in line with the
taxpayer's income tax return deadline by requiring the information
returns to be filed within six months after the end of
the taxpayer's taxation year. This will accelerate the deadline
for filing Form T1134 from its current due date, fifteen
months after year end.
In order to give taxpayers time to adjust to this change, the
measure will apply to taxation years of a taxpayer that begin
Also, the reassessment period for tax matters related to foreign
affiliates will be extended by three years (generally a
total of six years for individuals and CCPCs).
Sales and Excise Tax
GST/HST and Investment Limited Partnerships
Budget 2018 proposes that GST/HST apply to management and administrative services rendered by the general partner to an investment limited partnership on or after September 8, 2017, unless the general partner charged GST/HST in respect of such services before that date. This clarifies proposals originally released on September 8, 2017.
Second, Budget 2018 proposes that the GST/HST be generally payable on the fair market value of management and administrative services in the period in which these services are rendered.
Finally, Budget 2018 proposes to allow an investment limited partnership to make an election to advance the application of the special HST rules as of January 1, 2018.
GST/HST Holding Corporation Rules - Consultation
A Goods and Services Tax/Harmonized Sales Tax
(GST/HST) rule, commonly referred to as the "holding corporation
rule", generally allows a parent corporation to claim
input tax credits to recover GST/HST paid in respect of expenses
that relate to another corporation. This rule provides
that, where a parent corporation resident in Canada incurs
expenses that can reasonably be regarded as being in relation
to shares or indebtedness of a commercial operating
corporation (a corporation all or substantially all of the property
of which is for consumption, use or supply in commercial
activities) and the parent corporation is related to the commercial
operating corporation, the expenses are generally
deemed to have been incurred in relation to commercial activities
of the parent corporation.
The Government intends to consult on certain aspects of the holding corporation rule, particularly with respect to the limitation of the rule to corporations and the required degree of relationship between the parent corporation and the commercial operating corporation. At the same time, the Government intends to clarify which expenses of the parent corporation that are in respect of shares or indebtedness of a related commercial operating corporation qualify for input tax credits under the rule.
Budget 2018 indicates that consultation documents and draft legislative proposals regarding these issues will be released for public comment in the near future.
Budget 2018 proposes a new federal excise duty framework
for cannabis products to be introduced as part of the Excise
Act, 2001. The duty will generally apply to all products available
for legal purchase, which at the outset of legalization
will include fresh and dried cannabis, cannabis oils, and
seeds and seedlings for home cultivation.
Cannabis cultivators and manufacturers will be required to obtain a cannabis licence from the CRA and remit the excise duty, where applicable. The framework will come into effect when cannabis for non-medical purposes becomes available for legal retail sale.
The Goods and Services Tax/Harmonized Sales Tax (GST/HST) basic groceries rules of the Excise Tax Act will be amended to ensure that any sales of cannabis products that would otherwise be considered as basic groceries are subject to the GST/HST in the same way as sales of other types of cannabis products.
Excise Duty Rates for Cannabis Products
Sharing Tax Information Relating to Serious Non-Tax Offences
Budget 2018 proposes to enable the sharing of tax information with Canada's mutual legal assistance partners in respect of acts that, if committed in Canada, would constitute terrorism, organized crime, money laundering, criminal proceeds or designated substance offences (i.e., offences listed in section 462.48 of the Criminal Code).
A similar issue relates to the authority of the Attorney General to apply for a court order to allow Canadian police officers to obtain taxpayer information under the Income Tax Act for an investigation or prosecution of those offences. Currently, there is no ability to obtain similar confidential information under Part IX of the Excise Tax Act or the Excise Act, 2001.
To address this inconsistency, Budget 2018 also proposes to enable confidential information under Part IX of the Excise Tax Act and the Excise Act, 2001 to be disclosed to Canadian police officers in respect of those offences where such disclosure is currently permitted in respect of taxpayer information under the Income Tax Act.
Charities - Technical Issues
Transfers to Municipalities on Revocation of Registration
The registration of a charity may be revoked at the request
of the charity or because the charity has not complied with
its registration requirements. In such cases, a 100 percent
revocation tax on the charity based on the total net value of
its assets is applicable. The charity can reduce the amount
of revocation tax by making qualifying expenditures, including
gifts to "eligible donees".
Budget 2018 proposes to amend the Income Tax Act to allow transfers of property to municipalities to be considered qualifying expenditures for the purposes of the revocation tax, subject to the approval of the Minister of National Revenue on a case-by-case basis.
Universities Outside Canada
The donation tax credit or deduction may be available for donations made to universities outside Canada if they demonstrate to CRA that, among other things, their student body ordinarily includes students from Canada.
In 2011, the
Income Tax Act was amended so that certain categories of qualified donees, including universities outside Canada, were required to register with CRA, and to meet certain receipting and record-keeping conditions.
To simplify the administration of these rules and streamline the registration process for universities outside Canada as qualified donees, Budget 2018 proposes to remove the requirement that universities outside Canada be prescribed in the
Income Tax Regulations.
This measure will apply as of Budget Day.
Trusts - Beneficial Ownership and Control
To improve the collection of beneficial ownership information with respect to trusts, Budget 2018 proposes to require that certain trusts provide additional information on an annual basis. The new reporting requirements will impose an obligation on certain trusts to file a T3 return where one does not currently exist.
The new reporting requirements will apply to express trusts that are resident in Canada. They will also apply to nonresident trusts that are currently required to file a T3 return.
An express trust is generally a trust created with the settlor's express intent, usually made in writing (as opposed to a resulting or constructive trust, or certain trusts deemed to arise under the provisions of a statute).
Exceptions to the additional reporting requirements are proposed for the following types of trusts:
- mutual fund trusts, segregated funds and master trusts;
- trusts governed by registered plans (i.e., deferred profit sharing plans, pooled registered pension plans, registered disability savings plans, registered education savings plans, registered pension plans, registered retirement income funds, registered retirement savings plans, registered supplementary
unemployment benefit plans and tax-free savings accounts);
- lawyers' general trust accounts;
- graduated rate estates and qualified disability trusts;
- trusts that qualify as non-profit organizations or registered charities; and
- trusts that have been in existence for less than three months or that hold less than $50,000 in assets throughout the taxation year (provided, in the latter case, that their holdings are confined to deposits, government debt obligations and listed securities).
Unless one of these exceptions is met, trusts will now be required to report the identity of all trustees, beneficiaries and settlors of the trust, as well as the identity of each person who has the ability (through the trust terms or a related agreement) to exert control over trustee decisions regarding the appointment of income or capital of the trust (e.g., a protector).
These proposed new reporting requirements will apply to returns required to be filed for the 2021 and subsequent taxation years.
Budget 2018 also proposes to introduce new penalties for a failure to file a T3 return, including a required beneficial ownership schedule, in circumstances where the schedule is required. The penalty will be equal to $25 for each day of delinquency, with a minimum penalty of $100 and a maximum penalty of $2,500.
If a failure to file the return was made knowingly, or due to gross negligence, an additional penalty will apply. The additional penalty will be equal to five percent of the maximum fair market value of property held during the relevant year by the trust, with a minimum penalty of $2,500. As well, existing penalties will continue to apply.
The new penalties will apply in respect of returns required to be filed for the 2021 and subsequent taxation years.
Employment Insurance (EI)
Parental Sharing Benefit
Budget 2018 proposes an increase to the duration of EI parental leave by up to five weeks in cases where the second parent agrees to take a minimum of five weeks of the maximum combined 40 weeks available using the standard parental option of 55 percent of earnings for 12 months. In other words, as long as each parent takes at least 5 weeks, the couple will qualify for a total of 40 weeks (35 weeks otherwise).
Alternatively, where families have opted for extended parental leave at 33 percent of earnings for 18 months, the second parent would be able to take up to eight weeks of additional parental leave. In cases where the second parent opts not to take the additional weeks of benefits, standard leave durations (35 weeks and 61 weeks) will apply.
The proposed benefit will be available to eligible two-parent families, including adoptive and same-sex couples, to take at any point following the arrival of their child. The benefit is expected to commence in June of 2019.
Working While on Claim
Budget 2018 proposes to make the current EI Working While on Claim pilot rules permanent. The EI Working While on Claim pilot project allows claimants to keep 50 cents of their EI benefits for every dollar they earn, up to a maximum of 90 percent of the weekly insurable earnings used to calculate their EI benefit amount. These provisions were previously scheduled to expire in August 2018.
Extension of Reassessment Period
In recent months, CRA has issued numerous requirements
for information from third parties. Examples include Paypal's
disclosure of business accounts, contractor accounts at Rona,
and many condominium developers being required to
provide details of pre-sold units changing ownership before
the unit is acquired. Often, these demands for information
are challenged before the Courts.
Budget 2018 proposes to "stop the clock" on the usual reassessment deadline where these requirements are contested. A similar rule will apply to compliance orders issued by the Courts where the actual taxpayer contests requirements to provide information to CRA.
If CRA issues a requirement for information, and it is contested, the period from filing court papers to the final decision of the Courts (including any appeals) will not count towards the usual time limit for CRA to reassess any taxpayer affected by the information disclosed.
These new rules will apply where information requirements are challenged after these proposals receive Royal Assent.
Previously Announced Measures
Previously Announced Measures
Budget 2018 confirms the Government's intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:
- Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election;
- Income tax measures announced in Budget 2016 expanding tax support for electrical vehicle charging
stations and electrical energy storage equipment;
- The income tax measure announced in Budget 2016 on information reporting requirements for certain
dispositions of an interest in a life insurance policy;
- Technical income tax legislative amendments released on September 16, 2016, relating to a division of a corporation under foreign laws, and to the requirements to qualify as a prescribed share;
- The income tax measure announced in Budget 2017 to support the establishment of a tax-exempt Memorial Grant for First Responders (the Community Heroes benefit);
- The income tax measure announced on May 18, 2017 for additional tax relief for Canadian armed forces personnel and police officers;
- Remaining legislative and regulatory proposals released on September 8, 2017 relating to the Goods and Services Tax/Harmonized Sales Tax;
- The income tax measure announced on October 16, 2017 to lower the small business tax rate from 10.5 percent to 10 percent, effective January 1, 2018, and to 9 percent, effective January 1, 2019, which was included in a Notice of Ways and Means Motion tabled on October 24, 2017 along with related amendments to the gross-up amount and dividend tax credit for taxable dividends;
- The income tax measure announced on October 24, 2017 in the Fall Economic Statement to provide for the indexing of the Canada Child Benefit amounts as of July 1, 2018 instead of July 1, 2020; and
Budget 2018 also reaffirms the Government's commitment to move forward as required with technical amendments to improve the certainty of the tax system.
The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional.
No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.
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